In 2004 the Federal Government sought bids for the development and delivery of a new anthrax vaccine. As FORBES reported soon afterward ( June 6, 2005), none of the big drug companies responded. The old anthrax vaccine continues to be supplied by a tiny privately held company. The $900 million contract for the new vaccine went to an equally tiny enterprise that has never successfully brought a drug to market. As the New York Times recently reported (in a front-page story remarkably similar to the earlier FORBES account), these two corporate midgets are now locked in a Lilliputian lobbying battle to see who gets to protect Americans against bacterial spores that could quite easily be used to kill millions of people.

Why didn't Big Pharma show up? Start at the end and work back. If a backpack releases anthrax in a subway tomorrow, your doctor won't be able to help you. Call Donald Rumsfeld instead. The feds have a stockpile of vaccine, but only the Pentagon has the authority to prescribe it. And it's a very unusual authority at that, the kind you get only from a government utterly clogged with bureaucrats, judges and lawyers.

Anthrax is a rare occupational hazard for people who work with animal hides and hair. It is also a perfect biological weapon, because the spores aren't contagious--they just kill people on the spot. The cold warriors who developed the first anthrax vaccines in the 1940s and 1950s were not worried about illness in the goat-shearing industry. But because natural anthrax kills so few people, no human trials of the vaccine could ever develop very robust statistics on human lives saved. The federal agency that used to oversee biologic pharmaceuticals licensed the vaccine anyway.

When the Food & Drug Administration took over in 1972, it began relicensing anthrax and other bacterial vaccines. An advisory panel took seven years to submit its favorable report. Six more years passed before the FDA sought public comment, and then the agency failed to finish the paperwork. Military personnel vaccinated during the first Gulf war blamed unexplained illnesses on the vaccine, and a handful then persuaded a federal judge that the vaccine lacked a valid ticket. The FDA immediately issued the new license, but the judge said it was no good, because too much time had passed since the public had been asked to comment.

More than three decades into this relicensing crawl the Pentagon declared a military emergency, and the FDA invoked a law passed in 2004 to issue its first-ever "emergency use" license. The anthrax vaccine may now be administered to any soldier or civilian--but only when and where the Pentagon discerns a "heightened risk" of exposure. In a further effort to vaccinate the vaccine against lawyers, the Department of Homeland Security has just qualified the old vaccine as an antiterrorism technology. This provides broad protection from lawsuits connected with any injuries arising in connection with an act of terrorism--but a lot less legal immunity if the attack never comes.

Vaccines, however, work by getting the antibody into the bloodstream ahead of the attacking body. And the more widely a vaccine gets used, the less likely an attack with the corresponding microbe becomes. If the terrorists fail to show up, the lawyers will. They always do when lots of healthy people get vaccinated against a threat that never materializes.

No drug company with real assets is going to mess with licensing and liability systems that require help from both the Pentagon and the terrorists to keep our own terrifying lawyers at bay. So the cutting edge of the antibody-building industry goes instead to tiny biodefense contractors operating under the oversight of the huge federal bureaucracies. We replace private capital with government funding, profit-driven innovation with fixed-price government contracts and personal choice with public procurement. We stock silos in Nebraska to fight bacteria that are going to pop up unexpectedly in Yankee Stadium.

The first anthrax vaccine was developed at a time when contagious diseases were killing millions of Americans a year, without the help of backpacks. Imperfect though they were, vaccine markets worked tolerably well back then. Multiple companies competed to offer reasonably safe, effective vaccines to willing buyers. When the microbes return, we will bitterly regret that we have lost manufacturing capacity, innovative flexibility, citizen involvement, private choice and physician experience where we need it the most. "Stockpiling antibodies in the body," a former director of the Centers for Disease Control has observed, "is preferable to stockpiling vaccines on warehouse shelves."